<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996 Commission File No. 0-27338
______
GT INTERACTIVE SOFTWARE CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3689915
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
16 EAST 40TH STREET, NEW YORK, NY 10016
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 726-6500
______
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_____
------
As of August 1, 1996, there were 66,181,791 shares of the registrant's
Common Stock outstanding.
Page__ of ___
Exhibit index begins on page ____
<PAGE>
GT INTERACTIVE SOFTWARE CORP.
1996 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets as of December 31, 1995 (audited) and June 30, 1996 3
Consolidated Statements of Income for the three months and the six months ended
June 30, 1995 and 1996 4
Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and
1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements (Unaudited)
GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------- -----------
(audited) (unaudited)
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 82,799 $ 59,976
Short-term investments 9,563 9,767
Receivables, net 83,191 63,226
Inventories, net 48,512 44,514
Royalty advances 29,577 48,757
Deferred income taxes 14,046 15,465
Prepaid expenses and other current assets 1,914 4,246
--------------- --------------
Total current assets 269,602 245,951
Property and equipment, net 5,670 6,954
Goodwill, net 21,286 20,740
Investments -- 2,794
Other assets 1,011 1,422
--------------- --------------
Total assets $ 297,569 $ 277,861
=============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 87,366 $ 64,946
Accrued liabilities 44,452 35,599
Royalties payable 23,466 25,507
Deferred income 3,824 5,347
Income taxes payable 4,738 4,390
Current portion of long-term liabilities 1,184 1,536
Due to related party 955 159
--------------- --------------
Total current liabilities 165,985 137,484
Other long-term liabilities 7,788 6,506
--------------- --------------
Total liabilities 173,773 143,990
--------------- --------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par, 150,000,000 shares authorized,
62,687,416 shares issued and outstanding 627 627
Additional paid-in capital 112,763 112,763
Retained earnings 10,406 20,481
--------------- --------------
Total stockholders' equity 123,796 133,871
--------------- --------------
Total liabilities and stockholders' equity $ 297,569 $ 277,861
=============== ==============
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
Page 3
<PAGE>
GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For The Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1995 1996 1995 1996
-------- -------- -------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 30,298 $ 72,032 $ 64,420 $ 140,934
Cost of goods sold 17,440 41,144 36,368 81,687
Selling and distribution expenses 5,358 16,191 10,924 29,561
General and administrative expenses 4,028 5,873 7,347 12,885
-------- -------- -------- ---------
Operating income 3,472 8,824 9,781 16,801
Merger costs --- (1,573) --- (1,573)
Interest and other income, net 125 918 254 2,459
-------- -------- -------- --------
Income before income taxes 3,597 8,169 10,035 17,687
Provision for income taxes 1,457 3,381 318 7,599
-------- -------- -------- --------
Net income $ 2,140 $ 4,788 $ 9,717 $ 10,088
======== ======== ======== ========
Pro forma adjustment to income tax provision 3,997
--------
Pro forma net income $ 5,720
========
Net income per share $ 0.08 $ 0.16
Weighed average shares outstanding 62,687 62,687
</TABLE>
The accompanying footnotes are an intergal part of these financial statements.
Page 4
<PAGE>
GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
---------------------
1995 1996
-------- ---------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,717 $ 10,088
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 389 1,228
Deferred income taxes (5,756) (1,419)
Deferred income 1,065 216
Changes in operating assets and liabilities:
Receivables, net 17,620 19,965
Inventories, net (5,300) 3,998
Royalty advances (10,725) (19,180)
Due to related party, net (1,697) (796)
Prepaid expenses and other current assets (1,338) (2,332)
Accounts payable (1,117) (22,420)
Accrued liabilities (1,675) (8,853)
Royalties payable (723) 2,041
Income taxes payable 1,803 (348)
Other (861) (358)
--------- ---------
Net cash provided by (used in) operating activities 1,402 (18,170)
--------- ---------
INVESTING ACTIVITIES:
Purchases of investments --- (2,794)
Purchase of property and equipment (2,862) (2,064)
Purchases of short-term investments, net --- (204)
Proceeds from disposal of property and equipment --- 32
Purchases of Slash Corporation, net of cash acquired of
approximately $516,000 461 ---
--------- ---------
Net cash used in investing activities (2,401) (5,030)
--------- ---------
FINANCING ACTIVITIES:
Issuance of Series A preferred stock and warrants 15,015 ---
Proceeds from issuance of note to a related party 15,225 ---
Repayment of notes (10,471) ---
Distributions to stockholders (6,000) ---
Long-term liabilities (510) 377
--------- ---------
Net cash provided by financing activities 13,259 377
--------- ---------
Net increase (decrease) in cash and cash equivalents 12,260 (22,823)
Cash and cash equivalents - beginning of year 1,217 82,799
--------- ---------
Cash and cash equivalents - end of period $ 13,477 $ 59,976
========= =========
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
Page 5
<PAGE>
GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE -1- Significant Accounting Policies
Basis of Presentation
The accompanying interim consolidated financial statements of GT
Interactive Software Corp. and Subsidiaries (the "Company") are unaudited
but in the opinion of management reflect all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the results
for the interim period in accordance with instructions for Form 10-Q.
Accordingly, they do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
These interim consolidated financial statements should be read in conjunction
with the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
Net Income Per Share For The Three and Six Months Ended June 30, 1996
Net income per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during
the period.
NOTE 2 - Acquisitions
On June 24, 1996, the Company acquired all of the outstanding common
stock of WizardWorks Group, Inc. ("WizardWorks"), a publisher of consumer
software, in exchange for 2.35 million shares of the Company's common stock.
On June 28, 1996, the Company acquired all of the outstanding common stock
of Candel, Inc., the parent company of FormGen Corp. ("FormGen"), a publisher of
multimedia consumer software, in exchange for 1,032,777 shares of the Company's
common stock.
WizardWorks and FormGen (collectively the "Aquired Companies") have
been accounted for as pooling of interests and accordingly are included in
the Company's Consolidated Financial Statements as if the acquisitions had
occured on January 1, 1994.
The following represents the summarized results of operations for the
period prior to the consummation of the transaction, which is the three
months ended March 31, 1996, on a seperate company basis and combined basis:
<TABLE>
<CAPTION>
GT Interactive Acquired Pro Forma
Software Corp. Companies Combined
------------------ -------------- ------------
(in thousands)
<S> <C> <C> <C>
Net revenue $ 62,270 $ 6,632 $ 68,902
Operating income 7,745 232 7,977
Net income 5,100 200 5,300
</TABLE>
Page 6
<PAGE>
GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
NOTE 3-Inventories, net
Inventories consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
-------------- -------------
(in thousands)
<S> <C> <C>
Finished goods $ 51,545 $ 51,205
Raw materials 3,648 2,633
----------- -----------
55,193 53,838
Less: reserve for obsolescence 6,681 9,324
----------- -----------
$ 48,512 $ 44,514
=========== ===========
</TABLE>
NOTE 4-Supplemental Cash Flow Information
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------
1995 1996
-------- --------
(in thousands)
<S> <C> <C>
Issuance of Common Stock in connection with the
acquisition of Slash Corporation $ 20,000 $ --
Cash paid for income taxes 3,980 9,336
Cash paid for interest 170 43
</TABLE>
NOTE 5-Subsequent Event
On July 9, 1996, the Company acquired all of the outstanding common stock
of Humongous Entertainment, Inc., a premier developer and publisher of quality
children's software, in exchange for 3,458,375 shares of the Company's common
stock. This acquisition has been accounted for as a pooling of interests.
Page 7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
The Company is a leading publisher, merchandiser and distributor of
consumer software. Since it commenced operations in February 1993, the Company
has experienced rapid revenue growth and its product and customer mix have
changed substantially.
An important element of the Company's financial performance is its product
mix which has varied over time as the Company has built its business. The
Company's product mix has been composed of three broad product categories: (i)
front-line published software; (ii) value-priced software; and (iii) third-party
software. Because each of these product categories has different associated
costs, the Company's margins have depended and will depend, in part, on the
percentage of net sales attributable to each category. In addition, the
Company's margins may vary significantly from quarter to quarter depending on
the timing of its new published product releases. To the extent that mass
merchants require greater proportions of third party software products, some of
which may yield lower margins, the Company's operating results may be impacted
accordingly.
Through February 28, 1995, the Company was an S corporation for Federal and
New York state income tax purposes. The income tax provision for the six months
ended June 30, 1995 includes a deferred tax benefit of approximately $3.5
million due to the Company's change in tax status.
On June 23, 1995, the Company acquired all of the outstanding stock of
Slash Corporation ("Slash"), a leading publisher, purchaser, repackager and
distributor of value-priced software. Historically, Slash purchased excess
inventory from major publishers and sublicensed catalog titles. It sold these
products at lower price points or repackaged these and other products into
compilation boxes, such as five-packs and ten-packs, for volume sales primarily
to mass merchants. Slash's sales of purchased excess inventory have
traditionally occurred at lower margins than its sales of sublicensed catalog
products. The Company's value-priced software business primarily consists of
sublicensed catalog titles which are sold largely to mass merchant customers.
Slash's financial results have been included in the Company's Consolidated
Financial Statements on a purchase basis for the period since the acquisition.
On June 24, 1996, the Company acquired all of the outstanding stock of
WizardWorks Group, Inc. ("WizardWorks"), a leading publisher of value-priced
interactive entertainment, edutainment and productivity software. WizardWorks
publishes and distributes consumer software developed by external developers
for Windows, DOS and Macintosh formats.
On June 28, 1996, the Company acquired all of the outstanding stock of
Candel, Inc., the parent company of FormGen Corp. ("FormGen"), a leading
publisher of interactive entertainment PC shareware and software.
WizardWorks and FormGen (collectively the "Acquired Companies") have each
been accounted for as a pooling of interests, whereby the Company exchanged
3,382,777 newly issued shares of its common stock for all the outstanding shares
of the Acquired Companies' common stock. Accordingly, the Company's Financial
Statements for the six months ended June 30, 1995 have been restated to include
the results of the Acquired Companies.
Sales are recorded net of expected future returns which historically have
been experienced and reserved for at approximately 30% of gross sales.
The consumer software industry is seasonal. Net sales are typically
highest during the fourth calender quarter and are typically lower during the
second calender quarter. This seasonality is primarily a result of the
increased demand for consumer software during the year-end holiday buying
season.
Page 8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statement of operations
data as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
For the Three For the Six
Months Months
Ended June 30, Ended June 30,
---------------- ----------------
1995 1996 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 57.6 57.1 56.5 58.0
Selling and distribution expenses 17.7 22.5 17.0 21.0
General and administrative expenses 13.3 8.1 11.4 9.1
------ ------ ------ ------
Operating income 11.4 12.3 15.1 11.9
Merger costs -- (2.2) -- (1.1)
Interest and other income, net .4 1.3 .4 1.8
------ ------ ------ ------
Income before income taxes 11.8 11.4 15.5 12.6
Provision for income taxes 4.8 4.7 .5 5.4
------ ------ ------ ------
Net income 7.0 % 6.7 % 15.0 % 7.2 %
====== ====== ====== ======
</TABLE>
Net sales for the three months and six months ended June 30, 1996 increased
approximately $41.7 million or 138% and $76.5 million or 119%, respectively, as
compared to the three and six months ended June 30, 1995. This growth in net
sales for the three and six months ended June 30, 1996 was primarily
attributable to the introduction of newly published front-line titles, such as
Heretic: Shadow of the Serpent Rider, Gender Wars, Kingdom O'Magic and Duke
Nukem 3D, the continuing strong sales of Doom and Doom-related products and the
expansion of the Company's value-priced line of software. In addition, an
increase in the number of mass merchant stores supplied and serviced by the
Company, an increase in the shelf space available to the Company from its
existing mass merchant customers and an increase in sales from its existing mass
merchant shelf space contributed to the growth in net sales. The purchase of
Slash by the Company effective June 23, 1995 and the increase in the
distribution of third party software also contributed to the growth in net
sales. Additionally, during the six months ended June 30, 1996, the Company
released Just Me & My Dad and Vikings: Strategy of the Ultimate Conquest.
Cost of goods sold primarily includes costs of purchased products and
royalties paid to software developers. Cost of goods sold for the three and six
months ended June 30, 1996 increased approximately $23.7 million or 136% and
$45.3 million or 125%, respectively, as compared to the three and six months
ended June 30, 1995. Costs of goods sold as a percentage of net sales for the
three months ended June 30, 1996 decreased to 57.1% from 57.6% for the three
months ended June 30, 1995. This decrease was primarily due to a change in
product mix toward the Company's higher margin published front-line and
value-priced products, which increased to approximately 50% of net sales during
the three months ended June 30, 1996 compared to approximately 32% during the
three months ended June 30, 1995. During the six months ended June 30, 1996,
cost of goods sold as a percentage of net sales increased to 58.0% from 56.5%
for the comparable period of the prior year. This increase was primarily due to
a change in product mix driven by mass merchants for third party software
products which yielded the Company lower margins. The percentage increase was
partially offset by a shift in the overall Company mix toward the Company's
higher margin published front-line and value-priced products, which increased to
approximately 52% of net sales during the six months ended June 30, 1996
compared to approximately 44% during the six months ended June 30, 1995.
Page 9
<PAGE>
Selling and distribution expenses primarily include shipping expenses,
sales and distribution labor expenses, advertising and promotion expenses and
distribution facilities costs. These expenses increased approximately $10.8
million or 202% and $18.6 million or 171% during the three and six months ended
June 30, 1996, respectively, compared to the comparable periods of the prior
year. The increase was due to the additional advertising costs to support the
growth of the Company's published products and an increase in shipping costs
attributable to the overall increase in sales volume. In addition, costs
associated with the expansion of the Company's sales and distribution staff and
distribution center increased to support its growth. Selling and distribution
expenses as a percentage of net sales for the three and six months ended June
30, 1996 increased to 22.5% and 21.0%, respectively, compared to 17.7% and 17.0%
during the three and six months ended June 30, 1995, respectively.
General and administrative expenses primarily include personnel expenses,
facilities costs, professional expenses and other overhead charges. These
expenses for the three and six months ended June 30, 1996 increased
approximately $1.8 million or 46% and $5.5 million or 75%, respectively, as
compared to the three and six months ended June 30, 1995. The increase was due
primarily to the expansion of the Company's operations. General and
administrative expenses as a percentage of net sales for the three and six
months ended June 30, 1996 decreased to 8.1% and 9.1%, respectively, from 11.4%
and 13.3% for the three and six months ended June 30, 1995, respectively.
In the near term, selling and distribution and general and administrative
expenses are expected to rise, reflecting additions to the sales, distribution,
operational and administrative infrastructure associated with the Company's
anticipated growth. These expenses are expected to decline over time as a
percentage of the Company's net sales, though there are no assurances to this
effect.
Merger costs consist of legal, accounting and other professional fees
incurred by the Company to complete the acquisition of WizardWorks and FormGen.
Interest and other income, net increased approximately $.8 million and
$2.2 million for the three and six months ended June 30, 1996, respectively, as
compared to the comparable periods of the prior year. This is primarily
attributable to greater short-term investments and cash balances.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company's principal sources of liquidity included
cash and short-term investments of approximately $69.7 million. Cash used in
operating activities for the six months ended June 30, 1996 amounted to
approximately $18.2 million as compared to cash provided by operating activities
of $1.4 million for the six months ended June 30, 1995. This decrease is
attributable to the internally generated funds used to support the Company's
growth and fluctuations in relative levels of receivables, inventory, royalty
advances, accounts payable and income taxes payable. The relative level of
inventory to accounts payable as of June 30, 1996 increased compared to June 30,
1995 primarily as a result of the timing of sales and the scheduled payment of
the accounts payable.
The Company believes that existing cash, cash equivalents and short-term
investments together with cash expected to be generated from operations, will be
sufficient to fund the Company's anticipated operations for the next twelve
months.
Page 10
<PAGE>
Except for historical information contained in this Form 10-Q, the
information set forth herein may include forward looking statements that are
dependent on certain risks and uncertainties. Important factors that could
cause actual results to differ materially from the anticipated results include,
but are not limited to, world-wide business and industry conditions, adoption of
new hardware systems, software development requirements and their impact on
product launches, company customer relations and other risks detailed, from time
to time, in the Company's SEC filings including, but not limited to, the Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.
Page 11
<PAGE>
Part II.- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on June 20, 1996.
(b) The directors elected at the meeting were:
<TABLE>
<CAPTION>
For Withheld Non-Voting
--- -------- ----------
<S> <C> <C> <C>
Kenneth Cayre 55,677,069 45,700 3,581,870
Jordan A. Levy 55,677,069 45,700 3,581,870
William E. Ford 55,677,569 45,200 3,581,870
</TABLE>
Other directors whose terms of office continued after the meeting are
as follows:
Joseph J. Cayre, Stanley Cayre, Jack J. Cayre, Ron Chaimowitz, Steven
A. Denning.
(c) Other matters voted upon at the meeting and the results of those votes
are as follows:
<TABLE>
<CAPTION>
For Against Abstain Non-Voting
--- ------- ------- ----------
<S> <C> <C> <C> <C>
Ratification of Arthur Andersen LLP
as the Company's independent auditors 55,721,469 1,200 100 3,581,870
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
- -------------
The following exhibits are filed as part of this report:
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Reorganization by and among GT Interactive
Software Corp., GT Acquisition Sub, Inc., WizardWorks Group, Inc.
and the Stockholders of WizardWorks Group, Inc. dated June 24,
1996 (incorporated herein by reference to the exhibit with the
corresponding number filed as part of the Company's Current
Report on Form 8-K filed July 9, 1996).
2.2 Escrow Agreement by and among GT Interactive Software Corp.,
Paul D. Rinde, as the Stockholder Representative of Wizard-
Works Group Inc., and Republic National Bank of New York, as
Escrow Agent, dated June 24, 1996 (incorporated herein by
reference to the exhibit with the corresponding number filed
as part of the Company's Current Report on Form 8-K filed
July 9, 1996).
3.1 Amended and Restated Certificate of Incorporation
(incorporated herein by reference to the exhibit with the
corresponding number filed as part of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995).
3.2 Amended and Restated By-laws (incorporated herein by
reference to the exhibit with the corresponding number filed
as part of the Company's Registration Statement on Form
S-1 filed on October 20, 1995, and all amendments thereto
(File No. 33-98448)).
27.1 Financial Data Schedule.
____________
Page 12
<PAGE>
(b) Reports on Form 8-K
- -----------------------
A report on Form 8-K, dated June 24, 1996 was filed with the Securities and
Exchange Commission on July 9, 1996 announcing the acquisition of WizardWorks
Group, Inc. and Candel, Inc. in stock-for-stock mergers pursuant to the
respective Agreements and Plans of Reorganization.
GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
PRO FORMA STATEMENTS OF OPERATIONS
The following pro forma statements of operations give effect to the merger of GT
Interactive Software Corp. (the "Company") and WizardWorks Group Inc. and
Candel, Inc., the parent company of FormGen Corp., (collectively the "Acquired
Companies"), which were accounted for as poolings of interests. The pro forma
statements of operations combine the results of operations of the Company for
the three years ending December 31, 1995 with the results of operations of the
Acquired Companies for the three years ended December 31, 1995. These pro forma
financial statements should be read in conjunction with the historical financial
statements appearing elsewhere in this Quarterly Report on Form 10-Q, Current
Report on Form 8-K filed on July 9, 1996 and the Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
GT Interactive Acquired Pro Forma
Software Corp. Companies Adjustments Combined
-------------- -------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Net sales $ 204,135 $ 24,861 $ (3,223) $ 225,773
Cost of goods sold 129,552 9,821 (3,048) 136,325
Selling, general and
administrative expenses 43,290 13,293 --- 56,583
-------------- -------------- -------------- --------------
Operating income 31,293 1,747 (175) 32,865
Interest and other income, net 609 163 --- 772
-------------- -------------- -------------- --------------
Income before income taxes 31,902 1,910 (175) 33,637
Provision for income taxes 9,262 1,330 (75) 10,517
-------------- -------------- -------------- --------------
Net income $ 22,640 $ 580 $ (100) $ 23,120
============== ============== ============== ==============
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
------------------------------------
GT Interactive Acquired Pro Forma
Software Corp. Companies Adjustments Combined
-------------- -------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Net sales $ 85,176 $ 14,853 $ --- $ 100,029
Cost of goods sold 47,470 6,128 --- 53,598
Selling, general and
administrative expenses 17,366 6,905 --- 24,271
-------------- -------------- -------------- --------------
Operating income 20,340 1,820 --- 22,160
Interest and other income, net 30 (10) --- 20
-------------- -------------- -------------- --------------
Income before income taxes 20,370 1,810 --- 22,180
Provision for income taxes 1,661 770 --- 2,431
-------------- -------------- -------------- --------------
Net income $ 18,709 $ 1,040 $ --- $ 19,749
============== ============== ============== ==============
</TABLE>
Page 13
<PAGE>
GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------
GT Interactive Acquired Pro Forma
Software Corp. Companies Adjustments Combined
----------------- ----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
Net sales $ 10,306 $ 7,769 $ -- $ 18,075
Cost of goods sold 4,050 3,271 -- 7,321
Selling, general and
administrative expenses 5,325 4,052 -- 9,377
----------------- ----------------- ----------------- -----------------
Operating income 931 446 -- 1,377
Interest and other income, net 1 22 -- 23
----------------- ----------------- ----------------- -----------------
Income before income taxes 932 468 -- 1,400
Provision for income taxes 89 197 -- 286
----------------- ----------------- ----------------- -----------------
Net income $ 843 $ 271 $ -- $ 1,114
================= ================= ================= =================
</TABLE>
Note: The adjustments made to the above pro forma statements of operations
reflect the elimination of sales and purchases between the Company and the
Acquired Companies, the elimination of the gross profit remaining in ending
inventory relating to these sales and the income tax effect of these
eliminations.
Page 14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ RONALD CHAIMOWITZ
------------------------
Ronald Chaimowitz
Chief Executive Officer and Director
Date: August 14, 1996
By: /s/ ANDREW GREGOR
-----------------------
Andrew Gregor
Chief Financial Officer and Senior
Vice President, Finance and
Administration
Date: August 14, 1996
Page 15
<PAGE>
Exhibits
--------
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ---------- ----------- ----
<S> <C> <C>
2.1 Agreement and Plan of Reorganization by and among GT
Interactive Software Corp., GT Acquisition Sub, Inc., Wizard-
Works Group, Inc. and the Stockholders of WizardWorks Group,
Inc. dated June 24, 1996 (incorporated herein by reference to
the exhibit with the corresponding number filed as part of
the Company's Current Report on Form 8-K filed July 9, 1996).
2.2 Escrow Agreement by and among GT Interactive Software Corp.,
Paul D. Rinde, as the Stockholder Representative of
WizardWorks Group, Inc.,and Republic National Bank of New
York, as Escrow Agent, dated June 24, 1996 (incorporated
herein by reference to the exhibit with the corresponding
number filed as part of the Company's Current Report on form
8-K filed July 9, 1996).
3.1 Amended and Restated Certificate of Incorporation
(incorporated herein by reference to the exhibit with the
corresponding number filed as part of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995).
3.2 Amended and Restated By-laws (incorporated herein by
reference to the exhibit with the corresponding number filed
as part of the Company's Registration Statement on Form S-1
filed on October 20, 1995, and all amendments thereto (File
No. 33-98448)).
27.1 Financial Data Schedule.
</TABLE>
_______________
Page 16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 59,976
<SECURITIES> 9,767
<RECEIVABLES> 63,226
<ALLOWANCES> 3,969
<INVENTORY> 44,514
<CURRENT-ASSETS> 245,951
<PP&E> 8,704
<DEPRECIATION> 1,750
<TOTAL-ASSETS> 277,861
<CURRENT-LIABILITIES> 137,484
<BONDS> 0
0
0
<COMMON> 627
<OTHER-SE> 133,244
<TOTAL-LIABILITY-AND-EQUITY> 277,861
<SALES> 140,934
<TOTAL-REVENUES> 140,934
<CGS> 81,687
<TOTAL-COSTS> 81,687
<OTHER-EXPENSES> 42,446
<LOSS-PROVISION> 1,676
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,687
<INCOME-TAX> 7,599
<INCOME-CONTINUING> 10,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,088
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
